Specify compoundingMethod if calculation period is bigger than payment frequency

[ai]

Hello,

the IRD-7 rule requires to specify compoundingMethod when calculation period and payment frequencies differ. In case if calculation period is bigger than reset frequency compoundingMethod has no sense. Looks like in this case compoundingMethod should always be equal “None” and other values are incorrect?

[aarabadji]

Hi ai,

I don’t think what you are trying to do is valid FpML.

There are 2 more important rules that govern how calc, pay and reset frequency relate to each other:
ird-2 – http://fpml.aws.isda.org/spec/fpml-5-6-5-rec-1/html/confirmation/validation-rules/rules-english-ird.html#ird-2
ird-5 – http://fpml.aws.isda.org/spec/fpml-5-6-5-rec-1/html/confirmation/validation-rules/rules-english-ird.html#ird-5

This means 2 things:
1) You can’t pay more frequently than you calculate payments
2) You can’t calculate payments more frequently than you reset the index

I.e. the scenario you describe is actually invalid, in order to satisfy ird-2 and ird-5:
paymentPeriod >= calculationPeriod >= resetPeriod.

[Author]

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